How to Turn a Loan Denial into an Approval

Can I turn a loan denial into an approval? I’m guessing that most of you have never even thought of this question before. You might have applied for a loan before and when you get denied, well, that’s the end of it, right?

Most people don’t do anything further because they believe it’s over and done with. Yet, if you have the right mindset and great communication, you can turn most loan denials into an approval. In this article, I’m going to walk you through some of the steps that will help you turn a loan denial into an approval.

First, I want you to understand the mindset of an underwriter. That individual who looked over your file for a loan. I want you to imagine where they are right now. Imagine them in a corner office of some lending company and they are having a bad day. Finally, after dozens of files, your file comes in front of them. All they can see are the weaknesses.

They say something like, “This is a new unproven business and they were late four years ago on a payment and they don’t have any collateral. Yeah, let’s deny them.”

Boom, they stamp, in juicy red letters “Denial” on your loan form. That’s the end, right? Not quite. What you have to understand is, the underwriter looking at your file, is just a person. They are going through the ups and downs of life and as human beings, they’re not always perfectly objective when making decisions. They sometimes make mistakes. If an underwriter denies you, it isn’t always because you didn’t qualify. Maybe they looked over something, only saw the negatives, or didn’t even have all the necessary information.

I had a client who was starting a brand new business. We organized a funding plan for her and the first lender she went to to get a loan from flat out denied her. They said they weren’t going to give her a loan because she didn’t have a strong enough credit score, and didn’t have a good enough business to do it. She asked us how to deal with her denial and turn this into an approval. We advised her to call the lender back and, along with a few other things, she said, “listen, my income is increasing every year and my credit score is very strong.” She argued her case to the lender to approve her for $10,000. It worked! She got the $10,000 and was dumbfounded that it actually worked.

We advised her to call the lender back and, along with a few other things, she said, “listen, my income is increasing every year and my credit score is very strong.” She argued her case to the lender to approve her for a $10,000 loan. It worked! She got the $10,000 and was dumbfounded that it actually worked.

Most people don’t know that probably about 70% of lenders out there are willing to reconsider a loan or credit line and approve you. She turned that denial into a $10,000 approval because she showed the lender how great of a borrower she was.

When looking to change the lender’s decision, you need to show them why you’re a low-risk borrower. I suggest making a bullet point list of your attributes to give to your lender on why they should approve you for a loan. It’s like any other decision, the underwriter will weight the pros and cons, and then decide to lend to you or not. So it’s your job to load up the side of the pros.

One of the best ways to change the lender’s mind is to talk about the positives. Here are a few examples of what you should have on your sheet:

“I haven’t been late on payments in 3 years.”

“My income has gone up every year for the last 3 years.”

“My business is going really well. We don’t have any business loans or debt.”

“I have additional, verified income, which is way more than you need to get your payment each month.”

“When I went through that tough time it was during the recession, a lot of people had a tough time. But now, my credit score is strong because of how I methodically pay my bills. It’s all on auto payment and I’m not going to miss a payment.”

“My business is lower risk because I sell a physical product and I’ve been in the industry for 10 years.”

These bullet point items need to be honest, solid things, with facts to back them up. You need to show the lender why you’re the easiest low-risk borrower they’ve ever had.

Remember, you’ll never get approved if you’re just a flat out bad borrower, but if you think you’re on the edge of denial and approval, appealing to the lender will really work.

The other thing to consider is that 80-90% of the time it’s not the human, but a machine that initially makes the approval/ denial decision. You might apply for a loan and the system flag it. The system might look at something that isn’t exactly correct or something that is bad on your file which will lead you to an auto-denial. Everything else in your file says you’re is a good client, but they will still auto-decline you for a loan. You’ve got to understand this system might make a denial that might not make any sense.

In this case, you’ve got to get in touch with the lender and stay in contact. One thing I always say when turning loan denials into approvals is, “the squeaky borrower get’s the funding”. Just like, “the squeaky wheel on the car gets changed”, the squeaky borrower get’s the funding. Asking the lender to take another look, asking a real person, instead of a machine to reconsider, might be the ticket to getting approved.

Obviously, in every case, they aren’t going to reconsider. Sometimes the system is everything. It’s important to understand which lenders can make that denial into an approval. You know this by having great lines of communication with your lenders. If you’re communicating right out of the gate when you want to apply to get a loan, you have a lot higher chance of getting approved.
Remember, be a good communicator and show them why you deserve funding. Be in contact with your lender before you apply for a loan, while you apply for a loan and after you apply for a loan. Put together a list of why they should lend to you. Make sure that list is full of solid things that you can present to them and then give them that list. If you do this right, you can turn any denial into an approval.

Hope you have a happy and prosperous week! If you want to get the very best funding possible for your start-up, click here for a free consultation.

1 Comment

justin
on July 25, 2018 at 12:40 pm

All great but when i call the loan department they say “per our policy i cannot connect you with the underwriter so i can’t even plead my case lol. They also said they cannot relay any information to the underwriter- couldn’t even get an email… is this legal? I have a situation where i’m going to be without a car because my old car was totaled and my loan is with the same company and was my 2nd car loan with them and have never missed one payment since 2013 on either loans and even overpaid on some of the payments for the 1st car loan and my income has increased every single year- my credit score isn’t great but they can look at my debt to income and see i’m actually in a better financial situation than i was before yet i cannot even explain this because due to their “policy” this information cannot be brought to the underwriters attention..